1. From an initial long-run equilibrium, if aggregate demand grows more slowly t

Question

1. From an initial long-run equilibrium, if aggregate demand grows more slowly than long-run and short-run aggregate supply, then Congress and the president would most likely

a.       increase the required reserve ratio and decrease government spending.

b.      decrease government spending.

c.       decrease oil prices.

d.      decrease taxes.

2. Which of the following would increase the size of the government purchases multiplier?

a.       an increase in the tax rate

b.      an increase in the quantity of imports purchased by households from an increase in

income

c.       a decrease in the amount of consumption spending by households from an increase in

income

d.      a decrease in the amount saved by households from an increase in income

Explanation / Answer

1)d.      decrease taxes

2)d.      a decrease in the amount saved by households from an increase in income

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